Edmonton Business Consultant | Equipment & Software
Edmonton Business Consultant | Are You Wanting Amazing CPA Advice?
Yeah. Sometimes if you have more efficient equipment, quicker equipment, equipment with a bigger capacity, sometimes that can change the gross margin in an executive summary. Changing the entire metrics of the business plan. Yeah, I can see the whole why with the two I can be, cause it’s not, hi, thanks for tuning in for another episode of Aspirus Pearl CPA. Today as the Edmonton business consultant, we’re talking about the business plan equipment and software section. I have Denise here with me again. Denise, did you have any fun this weekend at all? I did, yeah. What’d you guys do? Do you know? I went to, um, uh, four year olds birthday party at the John Johnson Center and I learned the most interesting thing about woodpeckers. Really? Yeah. So woodpeckers have a tongue that’s as long as they are really, and they use it to wrap it around their brain so their brain doesn’t get damaged when they’re pecking for insects. It has an FDA concussion device. [inaudible] what? You wouldn’t know without a Business Consultant. That’s right. And you’d only find out my asking squirrel. [inaudible]
we’re finding and we’re finding animals with the longest tongue inch. Yep. There we go. So the uh, the quote that we have here today, it’s a Jim Collins cool author of six business books and he says thoughtless reliance on technology is a liability. And the statistic that we have are 50% of all Canadian small businesses go out of business in the first five years in 29% of these failed businesses will list running out of cash is one of the primary reasons for failure making running out of cash for the second most common reason for business failure. And the story that we have Denise, the one that we see is most business owners plans don’t tie the equipment and software into the rest of the business plans specifically. So in order to do that, in order to tie that equipment and software into the business plan and needs, what are the questions that these business owners should be asking? So one of the questions is, um, can equipment and software change the margins in the executive summary? Yes. Sometimes if you have more efficient equipment, quicker equipment, equipment with a bigger capacity, sometimes that can change the gross margin in an executive summary.
Changing the entire metrics of the business plan and you know, how much our customer’s worth, how much you can afford to spend on them in the, in the, uh, sales and marketing plan. So you’re really understanding how the, that equipment and software affects the, the gross margin. So the revenue and the direct costs of sales and the gross profit margin there on is important. And it should be considered when you’re devising that executive summary. and Ken equipment and software differentiate you from your competitors. It is, yeah. Equipment and software. We’re always looking at ways that we can differentiate us, uh, uh, ahead of our competitors. And sometimes having a piece of equipment or utilizing a piece of software can be that differentiation factor. I mean, it could be as simple as you have a piece of equipment that you’re the only one with that piece of equipment. Your competitors just don’t have it. So if you have that type of project that requires that piece of equipment, you’re the only one that can do it. If that’s the case, you want to identify that, you know, even if you’re not the only one. But you’re one of a few, um, that’s something you want to get out in front of your customers often. So it can be one of those differentiation factors in [inaudible] that might guide what marketing strategy you’re going to have or the price points that you’re going to, you’re going to charge with a Edmonton Business Consultant.
Um, so you really should consider if your equipment and software is significant enough that it can differentiate yourself from your competitors or sometimes you think it differentiates yourself from their competitors, but everybody else has it and they’ve caught up to you and then you have to focus on something else. So should you be specific about the cost of new equipment in the financing section? Yeah. So you need to be really specific about anything new that you’re going to buy. Um, you know, software’s is tough to get financing for, but often, you know, a lot of times software these days has monthly plans. Most people are, are selling software as a service, as SAS type products. Um, but you know, in terms when it comes to equipment, you want to be really specific about how much that’s gonna cost. Cause the banks won’t lend on a potential. They want to lend on an actual, you know, they didn’t want to say, hey, this piece of equipment costs exactly 109,000, $817 and 54 cents and you have a quote from a particular supplier to do it and you want to finance 80% of it and you’re putting up the other 20%, that sort of level of uh, uh, specifics in your financing section because the banks won’t fund on estimated amounts for equipment. So is available equipment and software consideration in the market trends section. Yeah. So you also need to look at it. If other people are buying equipment and they’re buying software and implementing software, automating their processes, sometimes that’s an advantage that you’re going to need to catch up to. Sometimes it’s a detriment and there are overly automating things that uh, you know, they’re better with a personal touch. Um, we see that a lot too and Jim Collins outlined at, well in the book, you know, thoughtless reliance on technology as a liability.
Uh, so that it can work both ways. But the key is you want to understand the trend, where the rest of your competitors going, is that something that you need to catch up to or you’ll, maybe they’re going in the wrong direction and they have a little bit too much technology in the process in it and you know, results in an inferior product. Um, that should be considered in the market trend section for sure. Is equipment and software a potential differentiator in the competitors section? Yeah. So don’t just think about the equipment that you have. You need to think about the equipment and software that your competitor has because that might be their differentiator. And if they are differentiator, you know, if they’re the electrician with a picker truck, um, maybe you should be running the Christmas light special with a, you know, installing lights, a hundred foot trees, uh, and try to do it with your ladder. Go to spurrell.ca for more more info on amazing services or just give us a call now at 780-665-4949 as soon as you can! And I compete on price with them. Uh, so you have to, you know, really understand not just what you have but what your competitor has, uh, because that might dictate what your differentiators should be because you don’t want to be competing in a, in an area where you’re outgunned, so to speak without a Edmonton Business Consultant.
Edmonton Business Consultant | Do You Seek Top Services For Your Business?
Um, is a description of critical equipment and software, part of the operations section. It should be, yeah, that, that, that should be part of the operations section. Here’s where you start describing what that equipment and software does. So you can communicate that to new. We as you have that, that specific operation section carved out for that purpose. Should you assume that lenders have no knowledge of industry specific equipment? Yes, you are. If you are in a plumber explaining equipment, uh, pretend you are not explaining it to another journeyman plumber and heck, you’re not even explaining it to your accountant who has a mild understanding of construction equipment. You’re explaining it to a banker who is never set foot on a construction site for the life and they’ve never swung a hammer. And they, you know, as someone, as they’ve hired someone at every stage of the life. So you have to understand that sometimes you need to describe this stuff at its lowest level. You’re not explaining it with a Edmonton Business Consultant for another professional in your industry. You’re explaining it for people outside of your industry. Um, you know, so we’ll, your accountants like us can give you good strategy. A lot of times that good strategy is if we understand what the equipment is for, you know, we have, you know, construction professionals and other industries and you might have an electrician with a piece of specialty equipment, but we know how to highlight that piece of specialty equipment in a sales and marketing plan. Uh, if we can understand it and sometimes you’re just explaining it so the, the banker on the other end will actually give you the loan because they don’t understand what it is. They might not finance it for you. Yeah.
Um, so should the purchase of new equipment or software B in the milestones section? Yeah. So when you think about purchasing that new software equipment, usually these are major purchases. You know, these are tens, if not hundreds of thousands of dollars. So we need to put it in the milestone section because even if you have the money and get the financing to do it, it’s going to be a while before that equipment arrives or gets installed or gets assembled. So we don’t want to do the projections based on, you know, something that’s going to happen in the, in the future. Uh, you know, we wanna do the projection of the current state of affairs and once that equipment, um, you know, gets laid out, it can be different, right? So we really want to have that a purchase of new equipment in the milestone section because often it’s, it’s stuff that you have to order, wait for install. It doesn’t happen away. Should the financial projections generally change once a new purchase is made?
Yeah. So as soon as you get that new piece of equipment, now a lot of times maybe you can change your pricing. Maybe you have more capacity because of that new equipment. But often you also have a nice new fat loan payment that goes along with it as well. So you’ve got to make sure that we have the cash to float it. And as we know, sometimes just because we increased the capacity doesn’t necessarily mean we have money coming in right away. Generally we have to increase the capacity and wait for, you know, revenue to increase up to that capacity slowly over time. So a lot of times we have to have enough cash put away that we can make the, the loan payments on the same amount of revenue. Um, you know, rather than just hope that that revenue’s gonna pop overnight. As soon as that new piece of equipment arrives with a Edmonton Business Consultant.
I will equipment sometimes present a capacity constraint in the projections. Yeah. So a lot of times when we’re looking at the equipment and software, let’s pretend we’re keeping with that existing equipment or software, you know, we need to know what the capacity of that equipment and software are, you know, for dealing with, you know, something with a CNC machine and it can only cut so many units per hour. Well, we can never sell any more than what that machine can cut unless we buy another machine. So we need to understand those capacity constraints. And a lot of them are the size of the location you’re in, the hours that you’re in and the equipment that you’re using a with. So we need to know what, you know, capacity constraints goes along with that equipment because that will often be the upper limit of the revenue projections.
And if we project beyond those capacity constraints, they’re just wishful thinking. They’re not an attainable figure. Right? And we can hope that that cash is going to come in. We need to plan on a reasonable amount of cash coming in. Now be sure to call us now at 780-665-4949 or go to spurrell.ca as soon as you are able to! So I think that’s what we have here today. As always, you know, please hit that lake and subscribe button so we can continue to help you with a Edmonton Business Consultant and deliver you tips on how to beat the odds at business. And if you have any questions or comments, you know, we’d love to see them below so we know we can respond back to you and use any ideas that you have for future videos. Thanks very much.